Econ 202 HW Exam 2

30 Questions | Total Attempts: 54

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Economics Quizzes & Trivia

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Questions and Answers
  • 1. 
    (Figure: Rent Controls) Examine the figure Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _____ or _____.
    • A. 

      Rent3; Rent4

    • B. 

      Rent2; Rent4

    • C. 

      Rent1; Rent3

    • D. 

      Rent0; Rent1

  • 2. 
    The likely result of a price floor is a:
    • A. 

      Shortage of the good at a price below the market equilibrium price.

    • B. 

      Surplus of the good at a price above the market equilibrium price.

    • C. 

      Shortage of the good at a price above the market equilibrium price.

    • D. 

      Surplus of the good at a price below the market equilibrium price.

  • 3. 
    (Table: Quantity Supplied and Quantity Demanded) Examine the table Quantity Supplied and Quantity Demanded. The government institutes a price floor, and as a result too many resources are allocated for the production of a good. The price floor in this market must be equal to:
    • A. 

      $10

    • B. 

      $5

    • C. 

      $15

    • D. 

      $20

  • 4. 
    (Figure: The Market for Round-Trip Airline Flights) Examine the figure The Market for Round-Trip Airline Flights. The supply and demand graph represents the market for round-trip airline flights between Boston and New York. Suppose the mayor of New York decides to limit the number of flights to Q1 to reduce air pollution. What area or areas represent deadweight loss after the quota is in place?
    • A. 

      A + b + c

    • B. 

      C + e

    • C. 

      B + d + f

    • D. 

      A

  • 5. 
    (Figure: The Market for Used Books) Examine the figure The Market for Used Books. The graph shows the market for used economics textbooks. If a quota of 100 books is imposed, the amount of the deadweight loss is:
    • A. 

      $1,000.

    • B. 

      $5,500.

    • C. 

      $6,750.

    • D. 

      $16,000.

  • 6. 
    In which case will an increase in the tax rate most likely decrease tax revenue?
    • A. 

      The elasticity of demand is 0.2 and the elasticity of supply is 2.1.

    • B. 

      The elasticity of demand is 3.3 and the elasticity of supply is 2.1.

    • C. 

      The elasticity of demand is 0.2 and the elasticity of supply is 0.5.

    • D. 

      The elasticity of demand is 3.3 and the elasticity of supply is 0.5.

  • 7. 
    When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve:
    • A. 

      Consumer surplus falls.

    • B. 

      A deadweight loss is created.

    • C. 

      Consumer surplus falls, producer surplus falls, and a deadweight loss is created.

    • D. 

      Producer surplus falls.

  • 8. 
    (Figure: The Shrimp Market) Examine the figure The Shrimp Market. If the government wants to limit shrimp sales to 500 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be ____.
    • A. 

      $7.50; $7,500

    • B. 

      $10; $2,500

    • C. 

      $5; $2,500

    • D. 

      $6.50; $3,000.

  • 9. 
    Suppose Congress passed a new tax system, such that all federal, state, and local taxes were replaced with one tax: a tax of $14,000 for every person 18 and older. This new tax system would clearly improve:
    • A. 

      Tax equity.

    • B. 

      Government revenue.

    • C. 

      Tax fairness.

    • D. 

      Tax efficiency.

  • 10. 
    Government intervention in the form of binding price floors or binding price ceilings will:
    • A. 

      Result in either surpluses or shortages.

    • B. 

      Always enhance the efficiency of the market.

    • C. 

      Move the market toward its equilibrium quantity more quickly.

    • D. 

      Often be seen as necessary to decrease the existence of black markets.

  • 11. 
    To maximize total net benefit from a particular activity, consumers and firms evaluate each activity at the:
    • A. 

      Top.

    • B. 

      Average.

    • C. 

      Margin.

    • D. 

      End.

  • 12. 
    (Table: Marginal and Total Benefit) Examine the table Marginal and Total Benefit. Sed is deciding how many football games he wants to attend this year. If tickets to each football game cost $10, then he should attend _____ game(s).
    • A. 

      2

    • B. 

      5

    • C. 

      1

    • D. 

      0

  • 13. 
    A “how much” decision is best made by comparing the:
    • A. 

      Marginal benefits of an action to the marginal costs of that action.

    • B. 

      Present value of an action to the net present value of that action.

    • C. 

      Accounting profit of an action to the economic profit of that action.

    • D. 

      Explicit costs of an action to the implicit costs of that action.

  • 14. 
    On Saturday night Alice plans to attend a movie. She buys a ticket for $7 and then loses it. According to marginal analysis, she should:
    • A. 

      Buy another ticket and attend the movie only if her marginal benefit of seeing the movie is more than $14.

    • B. 

      Buy another ticket and attend the movie.

    • C. 

      Look for the lost ticket.

    • D. 

      Go home.

  • 15. 
    Loss aversion can help to explain why:
    • A. 

      There is a status quo bias.

    • B. 

      People have unrealistic expectations about the future.

    • C. 

      People engage in mental accounting.

    • D. 

      Sunk costs are hard to ignore.

  • 16. 
    The purpose of behavioral economics is to determine why:
    • A. 

      People maximize utility.

    • B. 

      People make decisions that appear to be irrational.

    • C. 

      Firms maximize profit and minimize costs.

    • D. 

      Markets usually behave in an efficient manner.

  • 17. 
    Assuming that diminishing marginal utility applies to both goods, if a consumer buys more plastic bins and fewer door hooks, the _____ of plastic bins will _____, and the _____ of door hooks will _____.
    • A. 

      Marginal utility; rise; marginal utility; fall

    • B. 

      Marginal utility; rise; total utility; rise

    • C. 

      Marginal utility; fall; marginal utility; rise

    • D. 

      Total utility; fall; marginal utility; rise

  • 18. 
    Faruq spends all of his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. If Faruq spends all of his income, the opportunity cost of one milkshake is equal to _____ tacos.
    • A. 

      1/5

    • B. 

      2

    • C. 

      10

    • D. 

      5

  • 19. 
    Sam always tries to maximize his utility in his consumption of popcorn and soft drinks. Both of these goods are subject to diminishing marginal utility. Suppose the prices of these goods, along with Sam's income, do not change, but Sam decides he needs to decrease his consumption of popcorn. Holding everything else constant, this means that Sam would need to:
    • A. 

      Decrease his consumption of soft drinks, and his marginal utility per dollar spent on popcorn will be greater than it was initially.

    • B. 

      Increase his consumption of soft drinks, and his marginal utility per dollar spent on popcorn will be greater than it was initially.

    • C. 

      Increase his consumption of soft drinks, and his marginal utility per dollar spent on popcorn will be less than it was initially.

    • D. 

      Decrease his consumption of soft drinks, and his marginal utility spent on popcorn will be less than it was initially.

  • 20. 
    The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and Eddie has $10 to spend on both goods. The maximum number of bags of peanuts that he can purchase is:
    • A. 

      40

    • B. 

      20

    • C. 

      10

    • D. 

      5

  • 21. 
    Diminishing marginal returns means that:
    • A. 

      Each additional unit of an input used will decrease output.

    • B. 

      The firm is maximizing profit.

    • C. 

      Each additional unit of an input used will increase output, but by smaller and smaller amounts.

    • D. 

      Each additional unit of an input used will increase output by larger and larger amounts.

  • 22. 
    (Table: Production of Cabinets) Examine the table The Production of Cabinets. If each cabinetmaker could be hired at no cost, how many workers would Tara's firm employ?
    • A. 

      Two

    • B. 

      Eight

    • C. 

      Seven

    • D. 

      Six

  • 23. 
    (Table: Tonya's Production Function for Apples) Examine the table Tonya's Production Function for Apples. The information provided illustrates that Tonya is operating:
    • A. 

      In a very expensive location.

    • B. 

      At a loss.

    • C. 

      In the long run.

    • D. 

      In the short run.

  • 24. 
    Which is NOT affected by the existence of diminishing returns?
    • A. 

      Marginal cost curve

    • B. 

      Average variable cost curve

    • C. 

      Average total cost curve

    • D. 

      Average fixed cost curve

  • 25. 
    The total cost curve is:
    • A. 

      Negatively sloped.

    • B. 

      Vertical.

    • C. 

      Positively sloped.

    • D. 

      Horizontal.

  • 26. 
    (Table: Cost Data) Examine the table Cost Data, which shows data for a designer purse factory. The average fixed cost of producing 4 purses is:
    • A. 

      $82.50

    • B. 

      $12.50

    • C. 

      $50.00

    • D. 

      $47.50

  • 27. 
    If an increase in output results in a decrease in average total cost, the corresponding marginal cost is:
    • A. 

      Negative.

    • B. 

      Less than average total cost.

    • C. 

      Greater than average total cost.

    • D. 

      Equal to average total cost.

  • 28. 
    When an increase in the firm's output reduces its long-run average total cost, it achieves:
    • A. 

      Economies of scale.

    • B. 

      Diseconomies of scale.

    • C. 

      Variable returns to scale.

    • D. 

      Constant returns to scale.

  • 29. 
    In the long run, all costs are:
    • A. 

      Marginal.

    • B. 

      Constant.

    • C. 

      Fixed.

    • D. 

      Variable.

  • 30. 
    • A. 

      $8

    • B. 

      $1,508

    • C. 

      $1,492

    • D. 

      $14.50